Profile picture for jpascarelli2007

How does getting a mortgage work with a roommate?

Hi all,

I am just barely sticking my toe into the idea of real estate and I have a lot of questions. One that keeps coming up, though, is how to figure out how much house I can afford. I am intent on having a roommate for the foreseeable future, so I would need at least a 2br house. Currently my roommate and I split the rent unevenly, but we pay 1450/month for the house we rent. What is the process for getting a loan in my name but with the guarantee of having a roommate? 

Thanks!
  • December 13 2011 - Hyde Park
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Answers (16)

You would most likely not be able to use the "roommate" income.  Most lenders I work with would not allow this for qualification purposes.  You would both need to buy the home together in order use your combined incomes to qualify for the mortgage if that was necessary due to debt to income issues.

Even if you treated her as a tenant and had a contact most lenders will not allow you to use the income because they are renting a room in your home. Even if you were buying a rental house again there are many lenders that require you to have 2 years landlord experience which is proved by 2 years reporting of income on your tax returns.  There are some lenders who are more lenient on this but I think will have a hard time finding one that would allow "roommate" income as it is not guaranteed.

Hope this helps.
  • June 08
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In my opinion, buying a home with a "roommate" is not a good idea. If you really want to purchase a home, find one that you can afford or work on saving money to put towards a home. What happens should one of you decide that you are not happy in the home? It usually becomes a legal mess.
  • June 08
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Profile picture for sunnyview
"Just buy or rent a home together but not as a couple just two friends I'm pretty are they would allow that."

Sure lenders allow it, but when friendship or girl/boyfriend purchases go badly, it's lawyer time. Don't buy with any one that you're not married to without a watertight legal partnership agreement or you're asking for financial trouble if you hit any bump in the relationship.

If you don't want to pay an attorney to spell everything out in advance, then you are not ready to buy with another person.
  • June 07
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Profile picture for LMAONDJ
Just buy or rent a home together but not as a couple just two friends I'm pretty are they would allow that... Both of you will have a mortgage then ad split it in half ..
  • June 07
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buy the home yourself, move the roommate in and collect rent from him/her. The roommate(s) won't help in any way with qualifying for the mortgage, but sure help with the bills!

When I bought my first condo in AZ decades ago, I bought a 3/2 and rented 2 bedrooms out. My mortgage with HOA and everything was $500 and I charged each $300, so I wound up paying  negative $100 a month, plus getting the master bedroom and covered parking...
  • January 15 2012
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Profile picture for sunnyview
Buying a house with a roommate is a terrible idea. It is nothing but trouble. Even with a rock solid legal agreement it is a short hop away from a lawsuit or misery or both. Buy on your own and rent it out or wait until you can.
  • January 15 2012
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Why don't you buy a house with your roomate? At least that is what the loan originator will be asking you. If you do not qualify for a certain amount on your own and you do not want to bring in a partner, you might want to either keep leasing or buy what you qualify for.
  • January 15 2012
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Any lender will qualify you based on your income alone.  This is the best scenario anyway and protects you.  What is the roommate moves out?  you should be able to afford the place on your own.  Any income generated later by getting a roommate should be just a bonus for you.

Naima
  • December 15 2011
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A lender will be able to answer all of your questions concerning how much of a house you can afford. Unfortunately, they will not be able to include a roommate's income in this amount. This doesn't mean you won't be able to qualify for a loan. Creative financing is not a bad idea and it's not awful to have a room mate to help you pay off your debt! Just be cautious in that you don't get in over your head by buying more than you can afford without a roommate and be sure to have signed legal documents to ensure that you receive your due rent!
  • December 14 2011
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I looked into this when I bought a couple years back.  A roommate will not help with the amount you qualify for, but it will make your life easy.

Get a loan for a two bed (and hopefully two bath) based on your income, and use your roommate as a means to keep your expenses low.

Don't just charge half your monthly payment. Figure out what comparable properties are renting for, and charge accordingly.

Good luck!
  • December 14 2011
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This will not happen. Mentioning that you wish to rent a room to a lender is to defray cost, is not a good idea. You must qualify for a loan on your income alone or add a suitable cosigner to your loan. Good luck.

Happy funding, Rudi
  • December 13 2011
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Profile picture for sunnyview
I do not think that a lender will take your word on a guaranteed roommate and I do not think that they will consider their rent contribution either when you qualify.

You should run some numbers and see if there is any way for you to qualify for a house on your own with no roommate rent included. Dinkytown has some calculators here that might help you run basic numbers.

If you are looking at buying, buying a place that you could support without guaranteed roommates gives you the best flexibility month to month and will make it easier to pay for needed repairs or a late paying roommate down the line.
  • December 13 2011
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You most likely cannot use that income to qualify.  The reason is what if the roommate walks?  If you are refinancing an investment property you need to document 2 years of landlord experience to be able to use the rental income.  This is is documented via tax returns as the income must be reported to the IRS.

Your best bet is to buy a house you can afford alone and try to make something work for you and your roommate.  It could be good starter home for you and you may be able to keep it as a rental when you are ready to move to a larger home.

Best of luck to you.

  • December 13 2011
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Hi, jpascarelli2007.
Talk with a lender, as a professional will provide you with the most up-to-date requirements and make everything very clear. 

Unless you are looking to secure a loan with your roommate on the application, a lender will only consider your qualifications (income, debt, credit score, down payment, etc) without factoring an amount your roommate will pay. The reason is there is no guarantee you will maintain a roommate for the duration of the loan and the lender is betting on you being able to fulfill (or not) the obligation. 

Good luck!
  • December 13 2011
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A roommate will not factor into your ability to get a loan, especially since rental income does not count toward your debt-to-income ratio (the amount you make versus what you owe every month). It is irrelevant to the bank who lives with you or what they pay; what they do care about is your salary and any other forms of income that qualify. Unfortunately, having a roommate will not help you qualify for a different loan, but it does mean that if you qualify for a loan on your own, that you have the option to have someone supplement your payments.
  • December 13 2011
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I would start by contacting a lender to discuss the situation.  I do not believe a roommate is going to help you qualify for a loan.  If by chance it does, you would have to have an executed lease at the very least.  I usually encourage my buyers to only buy what they can afford without a roommate.  This protects you if your roommate moves out unexpectedly, or if their lease is up and you have a time span where there is no rental income coming in.
  • December 13 2011
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